The taxation system in Australia is based on the principle of fairness as well as the ability to pay. The concept of tax-free threshold is a specific income level that allows Australian workers to earn a basic amount without paying any taxes. The Income Tax Threshold in Australia 2026 will continue to apply at A$18,200 in the 2025 – 26 financial year, starting 1st July.
As more households still struggle with a cost-of-living environment, Many people consider income tax planning services in Perth to review these thresholds.
An income tax threshold can be defined as the limit of income that an individual can start to pay taxes on his/her income. This is often called the tax-free threshold, and its value ensures the lowest income earners do not have to pay taxes on smaller amounts of money as earnings. A personal tax advisor in Perth can provide tailored advice regarding this threshold.
The tax system uses progressive rates whereby, as an individual earns more, a certain percentage of their income is moved to higher tax brackets. When considering tax planning, you should stay updated on the ATO tax rates 2026 to get accurate tax value on your income.
👉 Not sure how the tax threshold affects you? Book your free initial consultation with a Perth tax expert today.
The official tax-free revenue has been identified to stand at slightly above A$18,200 as at the 2026 financial year. This limit is applicable to Australian residents, and those who earn less than this amount are exempt from paying income tax. To do such calculations, most of them rely on a tax accountant Perth to assist with calculations.
Many taxpayers are also paying close attention to the income tax changes 2026 Australia, to know how the reforms might affect their personal and business finances.
After the application of the tax-free threshold 2026, Australian residents will be paid on a number of income bands. The initial bracket under the threshold gets a comparatively low tax rate. As income rises, the next band observes a moderate tax rate increase. Meanwhile, high-income earners often pay about 30% or more of their annual income as taxes.
Here is the Australian income tax rates 2026:
| Taxable income | Tax on this income |
| 0 – $18,200 | Nil |
| $18,201 – $45,000 | 16c for each $1 over $18,200 |
| $45,001 – $135,000 | $4,288 plus 30c for each $1 over $45,000 |
| $135,001 – $190,000 | $31,288 plus 37c for each $1 over $135,000 |
| $190,001 and over | $51,638 plus 45c for each $1 over $190,000 |
The tax year 2026 represents the tax reforms that will be implemented at Stage 3 cuts. Most small businesses pay attention to a small business accountant Perth so that they know how the changes will impact them.
In comparison to 2024, here are the key changes that have been made: the lower marginal rate dropped from 19% → 16%, 32.5% → 30% and tax bracket thresholds increased from A$135k to A$190k.
👉 Confused which tax bracket applies to you? Our Perth accountants can help – get your free initial consultation now
The income thresholds are also important in defining how much of your income you can keep. They affect take-home pay, eligibility for government assistance, and the levels of taxes you pay to community services. Individuals who are interested in tax accounting Perth tend to go through these details in planning.
Let’s consider three individuals. The first one is a student or a part-time worker whose income level is quite low up to the threshold of being taxed. They can keep more of their salaries as most or all of their income. The second is a full-time employee earning an average income, where the individual shall enjoy the benefits of lower rates applicable to the middle-income brackets.
The third is a professional with a higher wage rate, contributing to the higher marginal rate at some income levels. Such individuals may consult an income tax planner for better financial outcomes.
The tax-free threshold does not apply to non-tax resident individuals. Instead, tax applies from the first dollar they have earned, at rates higher than those of Australian residents. A tax accountant for small businesses can also assist the business owners in navigating these requirements.
The working holiday makers receive special tariffs, which are a flat 15% rate on the first A$45,000, then tiered at 30%, 37%, and 45% due to their temporary working nature. To calculate such thresholds, you should seek consultation from professionals in the income tax services Perth.
Besides thresholds and rates, other policies such as the Medicare levy and tax offsets can significantly influence the tax position of an individual. Those with investments often review the capital gains tax threshold during tax planning.
Most of the residents are liable to pay the Medicare levy of 2% of any taxable income, but low-income earners can be exempted or they can pay lower rates. Individuals with high incomes but without sufficient health insurance are subject to a Medicare Levy Surcharge (MLS) of 1 or 1.5% with regard to their income levels.
Here are some specific tax offsets and deductions applicable to Australian taxpayers:
Consulting accounting services Perth can help you to optimise these tax deductions.
There are several strategies Australians can use to reduce their taxable income, along with following regularly considerations. Which are:
Many individuals seek professional tax accounting for guidance on these strategies.
Get up-to-date Australian advice by consulting the following sources:
An accountant in Perth can also help interpret these updates.
Also read: Missed the Tax Deadline? What Happens If You Don’t Lodge a Return
In the 2025 – 26 budget, the tax-free threshold of Australia stays at A$18,200 with a lower tax rate on the major brackets under Stage 3 of tax reforms. Although the Medicare levy, tax offsets, government rebates and deductions available to you are all important, being aware of your bracket and threshold is the best way to find your optimal take-home pay.
For complex situations, a small business tax consultant can provide valuable advice.
👉 Understanding the tax threshold is the first step. The next step? Maximising your tax return. Talk to our tax accountant Perth team for a free initial consultation.
Everybody who is a tax resident of Australia and earns more than the tax-free threshold will have to file a tax return. However, taxation of non-residents starts at the first dollar. Some non-residents may consult professionals in the individual tax rate Australia to understand their obligations.
The 2026 threshold of residence is going to be at A$18,200. For temporary workers, their first A$45,000 annual income is tax-free. This information aligns with the updated tax thresholds announced by the government.
Tax brackets in Australia are progressive, whereby the higher the income, the higher the rates. This structure reflects the tax brackets Australia 2026 that apply from 1 July.
Non-residents do not get the tax-free threshold. They are taxed from the first dollar of income earned in Australia and at different tax rates.
The ATO generally requires individuals to lodge a tax return if they earned more than $18,200, or if tax was withheld, or if you’re eligible for certain offsets or benefits.
No. As of 2026, the tax-free threshold remains unchanged at $18,200. However, the tax brackets above this threshold have changed due to the Stage 3 tax reforms.
Most temporary residents, such as working holiday makers and international students, don’t get the full $18,200 tax-free threshold. Their tax treatment depends on their visa and residency status.
The individual tax rates for 2026 are part of the Stage 3 tax cuts, with new brackets applying from 1 July. These changes affect how much tax you pay if you earn over the tax-free threshold.
If you earn below $18,200, and no tax was withheld, you may not need to lodge a return. However, if tax was withheld (e.g., part-time or casual work), you should lodge to claim a refund.
In 2026, you can earn up to $18,200 tax-free if you’re an Australian resident for tax purposes. Earnings above this threshold are taxed based on progressive income tax rates.
Copyrights © Palladium Financial Group 2026
